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RRSP MPP and DPSP Contribution Limits TFSA INFO BELOW
Anyone with RRSP contribution room can contribute to an RRSP, up to and including the year that the contributor turns 71 years of age. Contributions can be made to a spousal RRSP up to and including the year that the spouse or common-law partner turns 71 years of age. This maximum age was increased from 69 to 71 by the 2007 Federal budget, giving people an additional two years to contribute.
RRSP contribution room is based on "earned income". Generally, earned income includes a taxpayer's income (earned while the taxpayer was resident in Canada) from the following:
income from office or employment reported on a T4 slip (line 101 of the tax return)
other employment income (line 104) - this includes foreign employment income, which must be reported in Canadian dollars.
Employment income on a US W-2 slip may have been reduced by contributions to a "401(k), 457 or 403(b) plan, US Medicare and Federal Insurance Contributions Act (FICA)". These amounts must be added to foreign employment income on line 104. However, based on the Fifth Protocol to the Canada - U.S. Income Tax Treaty (Article XVIII), starting with the 2009 tax year, these amounts may be deductible on line 207 of your tax return. See the CRA information on Line 207 - RPP deduction.
income (less loss) from a business carried on by the taxpayer, either alone or as a partner actively engaged in the business
income (less loss) from rental of real property
royalty income regarding a work or invention of which the taxpayer was the author or inventor
taxable support payments received
CPP or provincial disability pension income
amounts received under a supplementary unemployment benefit plan (not federal Employment Insurance)
less deductible support payments made
If the taxpayer was not resident in Canada, but had income from employment performed or a business carried on in Canada, this may also constitute earned income, unless it was exempt from income tax in Canada due to a tax treaty with another country.
Immigrants to Canada can get more information about Canadian income tax and RRSPs from the CRA publication T4055 - Newcomers to Canada.
The maximum RRSP contribution amount that can be deducted is called the "RRSP deduction limit", and is also known as "contribution room" or "deduction room". Your deduction limit is found on your Notice of Assessment or Notice of Reassessment from Canada Revenue Agency (CRA). Your 2014 limit would be on your 2013 Notice. The deduction limit is calculated as:
18% of "earned income" for the preceding year, to an annual maximum (see following table)
less the "pension adjustment" amount, for participants in a Registered Pension Plan (RPP) or Deferred Profit Sharing Plan (DPSP)
less any "past service pension adjustment", for participants in a RPP or DPSP
plus any "past service pension adjustment" reversals
plus unused deduction room carried forward from the previous year
Note that RRSP withdrawals do not affect the deduction limit (contribution room) - that only happens with TFSAs.
The annual limits for RRSPs, money purchase (defined contribution) RPPs, deferred profit sharing plans (DPSPs), and defined benefit RPPs are:
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The DPSP limit is 1/2 of the MP limit each year. The MP limit and DPSP limits for pension adjustment (PA) purposes are also restricted to 18% of compensation.
For each year after 2009 for RPPs and 2010 for RRSPs, the limits are indexed for inflation using the Industrial Aggregate average wages and salaries in Canada.
RRSP limits lag behind RPP limits by one year because RRSP limits are based on prior-year earnings, and RPP limits are based on current-year earnings.
The maximum of $23,820 for 2013 would be reached at an earned income amount of $132,333 in 2012.
If the RRSP contribution is less than the deduction limit, then the "deduction room" is carried forward to future years. Assume Taxpayer 3 made a contribution of only $10,000 for 2013. The unused deduction "room" of $13,820 can be carried forward and added to the calculation of the 2014 deduction limit.
It is not mandatory to actually deduct the entire deduction limit amount on the current year tax return. If the taxpayer will be in a higher tax bracket in the following year, some or all of the contribution made can be carried forward to be deducted in a future year. The advantage of doing this must be weighed against the disadvantage of receiving the tax refund in a later year.
RRSP Excess Contributions
A taxpayer can contribute up to the amount of their deduction limit, plus an excess contribution as long as the total excess contribution never exceeds $2,000. However, the allowed excess will be less than $2,000 when the deduction limit is negative due to a PSPA amount. Also, only taxpayers who are 19 or older in the taxation year qualify to have an excess amount. Any excess contribution over $2,000 may be subject to a 1% per month tax.
When an excess contribution greater than $2,000 has been made, contact your financial institution or brokerage as soon as possible to determine the best remedy. If the contribution has already been reported to CRA, application can be made to CRA using form T3012A Tax Deduction Waiver on the Refund of your Unused RRSP Contributions, in order to withdraw the amounts without having income tax deducted. CRA will return the form, indicating the amount that is authorized to be withdrawn without deducting withholding tax. However, a tax on the excess may still be payable.
See Tax on Excess Contributions in the CRA publication T4040 - RRSPs and Other Registered Plans for Retirement. If you are required to pay the tax on excess contributions, CRA's form T1-OVP Individual Tax Return for Excess Contributions must be completed. If you are not sure if you are required to pay the tax, follow the steps in CRA's Determine if you have to complete a T1-OVP.
TFSA Contributions
The maximum amount that you can contribute to your TFSA is limited by your TFSA contribution room.
All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals made from a TFSA, will count against your contribution room.
At any time in the year, if you contribute more than your allowable TFSA contribution room, you will be considered to beover-contributing to your TFSA and you will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount remains in your account. For an example, see Examples – Tax payable on excess TFSA amount.
You do not need to have earned income to contribute to a TFSA.
As the account holder you are the only person who can do the following with your TFSA:
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make contributions;
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make withdrawals; and
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determine how the funds are invested.
You can give your spouse or common-law partner money to contribute to their own TFSA without having that amount, or any earnings from that amount being attributed back to you, but the total contributions you each make to your own TFSAs cannot be more than your individual TFSA contribution room. For more information, see TFSA contribution room.
Contributions made to a TFSA are not tax-deductible.
Management fees related to a TFSA trust and paid by the holder are not considered to be contributions to the TFSA. The payment of investment counsel, transfer, or other fees by a TFSA trust will not result in a distribution (withdrawal) from the TFSA trust.
TFSA contribution room
Your TFSA contribution room is the maximum amount that you can contribute to your TFSA.
Starting in 2009, TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada.
Note
Only contributions made under a valid social insurance number are accepted as TFSA contributions.
You will accumulate TFSA contribution room for each year even if you do not file an income tax and benefit return or open a TFSA.
The annual TFSA dollar limit for the years 2009, 2010, 2011 and 2012 was $5,000.
The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
The annual TFSA dollar limit for the year 2015 was $10,000.
The annual TFSA dollar limit for the year 2016 is $5,500.
The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500.
Investment income earned by, and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years. For an example, see Example 1 – TFSA contribution room.
How your TFSA contribution room is determined
The TFSA contribution room is made up of:
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your TFSA dollar limit plus indexation;
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any unused TFSA contribution room from the previous year; and
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any withdrawals made from the TFSA in the previous year.
Note
Qualifying transfers, exempt contributions and specified distributions are not considered in the calculation of contribution room.
For an example, see Example 2 – TFSA contribution room.
An individual will not accumulate TFSA contribution room for any year during which the individual is a non-resident of Canada throughout the entire year.
The TFSA dollar limit is not prorated in the year an individual:
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turns 18 years old;
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dies; or
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becomes a resident or a non-resident of Canada.
Note
You can have more than one TFSA at any given time, but the total amount you contribute to all your TFSAs cannot be more than your available TFSA contribution room for that year. As the account holder, you are the only person who can contribute to your TFSA.
Where can I find my TFSA contribution room information?
Your TFSA contribution room information can be found by going to one of the following services:
In addition, if you want to receive a TFSA Room Statement, contact us. You can also ask for a TFSA Transaction Summary that shows the information that we received from your TFSA issuer(s) about your contributions and withdrawals.
If the information that we have about your TFSA transactions is not complete or if you have made contributions to your TFSA this year, use Form RC343, Worksheet – TFSA contribution room, to calculate your TFSA contribution room for the current year. If we have deemed your unused TFSA contribution room to be a specific amount, do not use this form; contact us for more information.
You must keep records about your TFSA transactions to ensure that you do not exceed your TFSA contribution room. We will also keep track of an individual's contribution room and determine the balance of room for each eligible individual based on information provided annually by the TFSA issuers.
Representatives
You can authorize a representative (such as your spouse or common-law partner, tax preparer, or accountant) to get information about your tax matters and give us information on your behalf. We will accept information from and/or provide information to your representative only after we are satisfied that you have authorized us to do so through My Account for Individuals, in writing, or by sending a filled out Form T1013, Authorizing or Cancelling a Representative. Your authorization will stay in effect until it is cancelled by you or your representative, it reaches the expiry date you choose, or we receive notification of your death. You or your representative can cancel by telephone, in person, or in writing, the consent you gave.
If you were the legal representative of a deceased person, see Guide T4011, Preparing Returns for Deceased Persons, to know what documents are required.
Lear more about representatives by going to Represent a Client.